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HMRC’s decision on the Eclipse partnerships

HMRCs decision on the Eclipse partnerships mlm solutions

Following a review of their position in respect of the tax liabilities that apply in relation to the Eclipse tax avoidance scheme and having discussed the matter with a number of experts both internally and externally, HMRC have reached their decision in relation to how much tax partners in the scheme will have to pay.

As you may be aware HMRC challenged Eclipse Film Partners No.35 LLP on the basis that the partnership was not trading (despite claiming that it was) and therefore partners were not entitled to set off interest relief against their other income.  The First-tier Tribunal, the Upper Tribunal and the Court of Appeal confirmed this was the case.  In April 2016 the Supreme Court refused to hear the partnership’s appeal and therefore the decision became final.  During 2017, as a result of this decision, investors received Follower Notices and Accelerated Payment Notices, but these only requested that tax returns were corrected to remove interest relief set against other income, not against the partnership income.

HMRC have now reached the view that none of the interest relief claimed against partnership profits or other income is allowable, but the partnership profit share is still taxable.  HMRC are now in the process of finalising their liability calculation and will be writing to all partners in due course.

This could significantly increase the amount of liability owed by each partner.  Until the letters are received we have no way of knowing the difference this liability calculation will make.  However, based on a bankruptcy case where the APN value was in the region of £345,000 and the final proof of claim (including penalties, interest and Class 2 liability) from HMRC totalled in excess of £750,000…..I feel this calculation may push a number of partners in Eclipse from “wanting to pay” to “can’t pay”.

HMRC set up the Counter Avoidance Team in 2015 and the team now consists of over 45 trained Accountants, Tax Inspectors and professionals with both Insolvency and Legal backgrounds.  The team is litigating increased numbers of schemes each year and has collected in excess of £3 billion from users of tax avoidance schemes.

As per my previous blog there is still no doubt that public tolerance of tax avoidance is an historic low and for investors/partners in these schemes, it is a problem that is not going away.

HOW CAN WE HELP

At mlm we understand that facing up to financial challenges, such as tax issues can be very stressful.  We also understand that you may unwittingly find yourself on the wrong side of HMRC as a result of inadequately explained investment advice.  You should be reassured to know that there are options available and, with the right advice and support, you can take the necessary steps to resolve your situation. 

Should you have received a demand from HMRC in relation to tax matters, please do not hesitate to contact me directly on 0141 228 1329, email: bmochan@mlmsolutions.co.uk or alternatively complete our online enquiry form

HMRC Wins Tax Avoidance Case
DS (Slaughterhouse) Limited

 

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